RELOCATION

Relocation is the action of transferring a company's place of
operation from one physical location to another. For small businesses, the
act of relocating is often fraught with uncertainty, since the margin for
error in companies with modest financial resources is so small. Indeed,
the quality (or lack thereof) of a business relocation can be pivotal in
determining the financial success or failure of all sorts of business
ventures in a wide spectrum of industries, including retail, service,
wholesale, and manufacturing efforts.

Small businesses look to relocate for many different reasons. Some
business owners turn to relocation as a last resort, a final effort to
reverse the fortunes of a floundering business. These efforts rarely
succeed, though the reasons vary from business to business. In many cases,
the source (or sources) of the business's financial difficulties
lie in areas other than physical location. Inadequate capital, poor
management, flawed marketing plans, wasteful production processes, lousy
work habits, and a range of other maladies may be more directly
responsible for a company's anemic performance than its physical
location.

Of course, some small businesses struggle despite the presence of
competent and hardworking management/ownership and sound business
practices. In such cases, physical location might be a significant factor
in the company's disappointing performance, and relocation could go
far toward turning the business's financial fortunes around. But
business experts note that relocation is generally an expensive process,
and that small businesses that are struggling financially may find it
difficult to stay afloat during this transition period.

After all, companies that decide to relocate must absorb several financial
blows simultaneously:1) They have to pay for the expense of moving their
people, office furniture, and equipment into their new facilities; 2) They
have to pay for necessary changes to the new facility (these changes can
range from relatively minor rewiring to extensive reshaping of the
facility's physical layout); 3) Before relocation, business owners
and/or staff have to devote time to relocation research, negotiation, etc.
that would otherwise be spent on attending to money-making tasks; and 4)
During relocation, many businesses have to basically stop conducting their
business until they are situated in their new place of business. This
latter reality can cripple a fragile business, especially if the
relocation process proves more problematic than anticipated (as it often
is).

Of course, many successful businesses relocate as well, drawn by locales
that feature high traffic, attractive physical attributes, proximity to
needed transportation, advantageous financial terms, or, in some cases, a
friendly community environment.

RELOCATION TRENDS

In recent years, business observers have pointed to a general trend in
business relocations away from major metropolitan areas and toward small-
and medium-sized communities. Certainly, some companies are limited in
their relocation options by customer demographics and other factors, but
many firms—especially those established by
entrepreneurs—have forsaken large cities for smaller towns. Indeed,
desires for quieter lifestyles away from pollution, crime, and other
attributes often associated with large cities, coupled with the advances
that have made telecommuting a reality, have led many entrepreneurs to
relocate to more rural locations.

But although such settings have many positive aspects in terms of
so-called "quality of life" considerations,
entrepreneurs and other small business owners still need to weigh the
potential drawbacks of making such a move on their livelihoods. As Brian
Steinberg observed in
Entrepreneur,
"hurdles litter the track. [Entrepreneurs] must absorb the shock
of adjusting to rural culture, navigate the difficulties of keeping family
together, and discover new business practices necessitated by an
out-of-the-way location."

Steinberg went on to describe several obstacles that small business owners
may face when trying to make a successful relocation to a small-town
setting. "The struggle to find employees constitutes one concern
for rural entrepreneurs; getting along with the neighbors is yet
another," he noted. "While the added tax dollars and
employment opportunities a new company provides a small town are quite
welcome, the success a firm might bring can also have some undesirable
effects. A successful company may supersede existing firms in importance
and influence, taking away employees and even driving up home prices.
Towns sometimes offer economic incentives to lure new business
owners—money local companies might view as ill-spent."

In addition, some entrepreneurs find that smaller communities do not
provide the same level of services that can be found in larger cities.
These inconveniences, noted Steinberg, can range from troublesome ones
like unreliable electric service (perhaps necessitating the purchase of
backup generators), lack of overnight delivery services (Federal Express,
etc.), and an absence of local access numbers for Internet service (which
can force businesses to pay exorbitant long-distance telephone costs to
access the Internet), to downright crippling ones, like a dearth of
qualified workers. "Preparation is the key to a successful move to
the hinterlands," concluded Steinberg. "Location, available
work force, proximity to transportation, local attitudes, and culture
shock are all factors to consider."

LOCATION NEEDS OF VARIOUS BUSINESS TYPES

Small businesses will have different site needs that need to be considered
when relocating, depending on their industry—retail, service,
wholesale, or manufacturing—and their own financial and cultural
factors. Whatever their area of business, however, small business owners
need to make sure that they take the time to adequately examine all facets
of a move. "A well organized site selection process should include
research, planning, developing the transaction structure, analyzing the
proposal, documenting the transaction, and negotiating for government
incentives," wrote John R. Frazier in
Los Angeles Business Journal.

When researching the merits and drawbacks of each potential relocation
site, Frazier urged business owners to define each place by three primary
measurements: specific location attributes, physical attributes, and
occupancy cost parameters. "Specific location attributes might
relate to transportation issues such as circulation patterns of surface
streets and access to rail. Additional considerations would include
corporate identity/image issues, attitudes regarding alternative
government jurisdictions and any special utility needs for the proposed
use," he wrote. "Physical attributes address structure and
layout as they relate to form and function and include such on-site
characteristics as topography, existing layout, ceiling heights and load
bearing requirements. Goals with respect to occupancy costs will vary
according to whether the firm plans to occupy on a fee ownership basis or
as a tenant, but … could include special tenant improvement
allowances, moving allowances, an option to purchase, a cash incentive, or
even an ownership position as a tenant."

Business consultants and small business owners who have successfully
undertaken relocation efforts urge managers and owners of small
enterprises to examine a long list of specific concerns before making any
relocation decisions. A relocation based on knowledge, after all, is far
more likely to succeed than one that is predicated on assumptions and
hopes. Following are some of the factors entrepreneurs should weigh in
considering a relocation:

Determine if projected revenues will cover the cost of leasing or
purchasing the site.

Research whether ancillary costs associated with the relocation can be
absorbed by the company.

Honestly appraise the impact that relocation will have on the
business's cash flow and productivity.

Determine whether it will be possible to secure lenders to help cover
costs associated with moving into the new business site.

Investigate whether the targeted site is located in an area that has
restrictive ordinances that will unduly interfere with your
company's operations

Enlist the services of experts to determine if both the exterior and
interior of the target building or facility are in good condition and
adequately meet your business's layout and image requirements.

If refurbishment is necessary, find out how much it will cost and how
long it will take.